Our mission is to make tax simple and save you stacks of cash! Income tax has been confusing UK taxpayers for years resulting in taxation panic and worry, but SimpleTax is here to make things easy. Today, we’re going back to basics; we’re going to tell you what income tax is and what you need to pay tax on.
What is income tax?
Income tax is a tax levied directly on personal income. To put it simply, income tax is tax on your earnings. Once your earnings go above your personal allowance you must pay tax on the following sources of income:
- Income from employment
- Income from pensions
- Interest on savings
- Rental income
- Employment benefits
- Income from a trust
Income tax is a sad fact of life and if you receive income from any of the above sources you may need to file a self-assessment tax return. First off, find out for sure if you need to file a tax return by asking the SimpleTax SA Checker. It’s free, easy to use and takes less than a minute.
How do I pay income tax?
There are two ways you can pay UK income tax:
- PAYE (pay as you earn): income tax deducted from your salaried pay
- Self-assessment: UK taxpayers who are self-employed or have any of the income sources above, must file a self-assessment tax return each year.
How much tax do I pay?
How much you pay depends on which tax bracket you fall in:
Basic rate: tax is payable at the basic rate of 20% on taxable income up to £45,000
Higher rate: If your taxable income falls between £45,000 but is less than £150,000, tax is payable at the higher rate of 40%
Additional rate: If you have more than £150,000 you will have to pay an additional rate of 45%
On a brighter note, you will be relieved to hear that not all income is taxable. You don’t need to pay tax on:
- Income from tax-exempt accounts, such as ISA’s
- Working tax credit
- Premium bonds
- National savings certificates
With SimpleTax, you need not worry about income tax; we make it insanely easy to file your tax return. Still unsure whether you need to file a self assessment tax return, simply ask the SimpleTax wizard and you’ll get an instant answer. Register now .
Other Keywords: money; wage; sales; received; paid